CBK Governor downplays concerns on weakening shilling


CBK Governor downplays concerns on weakening shilling
Central Bank of Kenya Governor Dr. Patrick Njoroge. PHOTO| COURTESY

The Central Bank of Kenya (CBK) has eased concerns on the shilling’s value quelling fears to the volatility of the local unit.

The shilling for instance on Monday breached the Ksh.102 mark against the US dollar for the only second time in 2019 before settling at an average Ksh.101.90 at the close of trading on Wednesday.

According to CBK Governor Patrick Njoroge, the movement in the shillings value remains subdued even in the face of a huge import bill in recent weeks and ongoing demonetization to the old series Ksh.1000 notes.

“We need to be more relaxed on the shilling, a little difference to its value recently is nothing in the bigger picture of things,” he said.

The Central Bank has tipped the shilling to remain well anchored on the employed flexible exchange rate only promising to step in to minimize volatility.

The shilling has in three weeks from the June 1, 2019 demonetization directive come under pressure from the dollar losing ground by about 60 cents from an average Ksh.101.30 at the end of May.

While experts have on one hand linked the failing shilling to the infiltration of demonetization effects, heavy imports on petroleum have hiked dollar demand while on the flip side, the shilling has domestically taken a hit from increased liquidity mainly on account of the dividend payout season.

CBK has in its capacity options to quell any upward pressure on the shilling included the sale of US dollar units in its reserves and increasing the threshold of commercial bank reserves to mop up the excess supply of money in the economy.

The Central Bank’s usable foreign exchange reserves for instance hit an all time high of Ksh.1 trillion (USD 10.1 billion) or an equivalent 6.4 months of import cover.

Further, the reserve bank has through its comprehensive monetary policy stance kept inflation within the 2.5-7.5 target range to quell concerns on the occurrence of inflationary pressure against odds of increase food and fuel prices in recent months.

It is from the heavy backing of macro-economic conditions that the Central Bank draws confidence on the steadiness of the local unit.

“We have more than enough fire power to deal with any volatility to the shilling’s value,” Governor Njoroge added.

Moreover the Central Bank will take respite from the long-standing stability of the shilling in spite of the considerable pressures.

While other currencies on the continent have bowed to an ever strengthening US dollar, the Kenyan shilling has stood firm to weather the storm, staying with a range of 3 percent on either side of the Ksh.100 mark since January 2017.

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Story By Kepha Muiruri
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